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New Innovations: Fintech’s Changing Landscape

“The heart of fintech beats in perpetual innovation, not in stagnant certainty”

The Global Fintech Fest(GFF) 2023 was witness to the innovations in fintech especially related to payments and lending which was long brewing.

NPCI and UIDAI took the lead by introducing many revolutionary products. This wave of new ideas will encourage fintech leaders to improve and update their business models in a good and forward-looking way.

Product Launches

NPCI has evolved beyond UPI to become the cornerstone of fintech in India, shaping and governing fintech innovation. This was evident at the 2023 Global Fintech Festival (GFF) 2023 in Mumbai, where a range of product launches unveiled the depth of innovation in progress. Startups now perceive NPCI not only as a facilitator but also as a significant partner.

New Products Based on UPI (Unified Payments Interface):

Credit Line on UPI: Game Changer for Digital Lending

The introduction of credit on UPI is a seismic shift in the fintech landscape. This feature enables consumers to transact using pre-sanctioned digital credit lines, seamlessly integrated with UPI apps and payment products. Why? It is NPCI’s quest to take UPI to 10,000 Cr monthly transactions, take a part of the lending pie and increase its profitability. This transforms UPI from a payment rail into a credit ecosystem seamlessly.

UPI-ATM for QR-Based Cash Withdrawal:

NPCI introduced UPI-ATM, revolutionizing cash withdrawals. This innovation enables users to withdraw money from ATMs without needing a physical card, enhancing convenience and security. With just a smartphone and PIN, users can effortlessly initiate transactions. it is still to be seen if it will dampen the debit card market, but it is probable that the debit card market needs to innovate soon.

UPI AutoPay on QR for Recurring Payments:

With UPI AutoPay on QR, merchants can now streamline recurring payments. Customers can scan the QR code, validate AutoPay details, and promptly activate services, enhancing the user experience.

Aadhaar-based onboarding on UPI 123 Pay:

NPCI extended Aadhaar-enabled onboarding to UPI 123PAY, enabling feature phone users to create UPI IDs using their Aadhaar card numbers. This empowers those without smartphones or digital payment instruments to make payments directly from their bank accounts.

Conversational Payment with IOT Devices:

NPCI, in collaboration with Amazon Alexa, showcased the future of peer-to-peer money transfers. Users can now use voice commands to transfer money through Alexa on Echo Show smart speakers, simplifying transactions and enabling real-time balance inquiries. This feature is also available on smartphone UPI Apps, including BHIM.

UPI LITE X and Tap & Pay: Two Innovations Transforming Offline Payments!

With the launch of UPI LITE X, the RBI has taken offline payments to a new level. Now, users can send and receive money even without an internet connection. This means transactions can happen in places with poor connectivity, like underground stations or remote areas. UPI LITE X is accessible to anyone with a compatible device that supports NFC technology.

The RBI also introduced UPI Tap & Pay. This means, that besides the traditional Scan and Pay method, users can now effortlessly tap NFC-enabled QR codes at merchant locations to complete their payments. It's a seamless way to make digital transactions even more convenient!

Improved Face Authentication by UIDAI (Unique Identity Authority of India)

UIDAI has unveiled an enhanced Face Authentication feature, powered by cutting-edge AI and ML technologies. With the theme of "reimagining Aadhaar authentication," UIDAI is committed to providing seamless services through the Aadhaar identity platform.

Features:
Online

  • Low light performance
  • Use AI/ML to extract mathematical models for low bandwidth area
  • Wider device support
  • Multi-factor authentication (Face image, Face to OTP)

Offline

  • QR code digitally signed by UIDAI with information on face, demography, email and phone, etc.

Use cases

  • Regulated entities like lenders can use the Face Authentication feature instead of Digilocker-based authentication or Aadhaar.
  • Attendance systems under MGNREGA

Impacts

  • Increased Role in Credit Provision: Banks now have the opportunity to provide pre-approved credit lines for their customers through UPI. This transforms UPI from a payment platform into a credit ecosystem. Banks will see an expanded role in providing credit, thereby increasing their lending portfolio
  • Boost to Digital Payments: The continued growth of UPI, with innovations like Conversational Payments and Conversational Bill Payments, will further boost digital payments. Banks and financial institutions will benefit from increased transaction volumes and the associated fees
  • Financial Inclusion: The introduction of pre-sanctioned credit lines on UPI as well as conversational UPI & UPI LITEX will enhance financial inclusion, bringing more & more population under the digital payments gambit. More individuals and businesses will have access to credit, leading to increased business for banks and financial institutions
  • Disruptive Potential: The combination of UPI's smooth operation and the availability of live credit lines has the potential to disrupt the traditional lending and payment landscape. Banks and financial institutions will need to adapt to this new reality to stay competitive
  • Enhanced Accessibility: UPI LITE X and Tap & Pay will make digital transactions even more accessible, including in areas with poor connectivity. This expanded accessibility will lead to increased usage of digital payment services
  • Transition to Cardless Transactions: UPI ATM Cardless Transactions represent a significant step toward a cashless economy. Banks will play a pivotal role in facilitating this transition, ensuring that their customers can seamlessly withdraw money without physical cards
  • Competition and Collaboration: Moving forward as UPI evolves into a credit ecosystem, collaboration between banks and fintech companies may become more common to harness the potential of these innovations. Time will unveil if it will hamper the credit card market or co-exist together

Partnerships

  • NPCI International and Paymentwall Agreement: NIPL, a subsidiary of NPCI, partners with Paymentwall Ltd., a global cross-border payment solutions provider. This collaboration extends UPI acceptance to the USA and UK, allowing Indian consumers to make e-commerce purchases internationally, marking a significant milestone for NIPL's global expansion
  • NBBL and SBI NCMC Onboarding: NBBL, an arm of NPCI, introduces 'NCMC Recharge' on Bharat BillPay. SBI NCMC is the inaugural biller to join. This addition streamlines recurring payments for consumers, enabling recharges from Rs. 100 to Rs. 2,000 through various channels, ensuring a hassle-free experience for public transport users
  • Co-Creation Framework: NPCI unveils a unique Co-Creation Framework to drive innovation and collaboration in the digital payments ecosystem. This initiative empowers organizations to develop forward-thinking solutions and standards, emphasizing innovation as a key driver of success
  • Merchant Value Program (MVP): NPCI launches MVP, an innovative initiative focused on enhancing collaboration and innovation among top merchants in India. This program aims to improve customer experience, increase success rates, and facilitate co-creation, showcasing NPCI's commitment to driving innovation in merchant engagement
  • NPCI Partner Program (NPP): NPCI introduces NPP to foster collaboration with tech partners providing various services to regulated entities. In its first year, NPP provides platforms like Partner Xchange, Partner Bridge, Partner Series, and Partner Lab, aiming to expand the retail payments ecosystem by enabling more technology service providers on NPCI products and services

These partnerships and collaborations underscore NPCI's unwavering commitment to driving innovation, financial inclusivity, and seamless experiences for users across India's digital and financial landscape. Through these initiatives, NPCI aims to transform India into a fully digital society with secure, accessible, and cost-effective payment solutions.

Impact on fintech startups

Fintechs are poised to channel their energies towards leveraging UPI-enabled services for strategic growth. This entails not only capturing new customers but also capitalizing on cross-selling opportunities.

A prime example is GOkiwi, which ingeniously transformed a basic UPI feature into an entire platform, showcasing the potential for innovation within this realm. It enabled credit card payments through UPI anywhere & everywhere.

Additionally, the integration of the credit market into the UPI platform is set to usher in a new era of maturity and accessibility plus the new Face Authentication service of the UIDAI will make KYC easier.

The possibilities are vast, with fintechs exploring myriad avenues to harness the power of UPI technology, from pioneering new services to enhancing existing offerings. This dynamic landscape heralds an exciting phase for the fintech industry, characterized by inventive solutions and expanded horizons.

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New Innovations: Fintech’s Changing Landscape

Ankit Abhishek
,
Yatharth Chaudhary
,
  • January 23, 2024
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